A new dawn for the NDA
Following a deluge of harassment allegations which came to light during the #MeToo movement, the application of NDAs has been put under the spotlight. High profile cases have shown very publicly that NDAs have dramatically delayed the reporting of some sexual harassment cases, and certainly been a strong contributor to the low level of reporting of instances of harassment in general.
Regulatory and Governmental bodies alike have responded. The SRA[1] released a warning note in relation to the appropriate use of NDAs in March 2018. The House of Commons Women and Equalities Select Committee published a report[2] in July 2018 on sexual harassment in the workplace. The committee is also conducting an inquiry into the use, and potential abuse, of NDAs, and whether their use in the future should be regulated. Then at the beginning of this year, The Law Society issued a practice note on “non-disclosure agreements and confidentiality clauses in an employment law context”[3].
All three bodies warn that the use of an NDA for the protection of an unlawful or improper acts is unenforceable, and those that advise on or assist in the drafting of agreements of this sort could well be subject to disciplinary action.
All this builds to a timely reminder of the proper use of NDAs in the workplace. They are to protect the disclosure of confidential information, not to conceal workplace misconduct or silence victims of harassment.
The future of NDAs
In December 2018, Theresa May said she would “look at” the use of NDAs.
The growing controversy surrounding the application of NDAs is thought to have prompted the Government to consider a ban. A Whitehall source[4] said: “The intention is to stop NDAs being used to stop the victims of sexual harassment from going to the police, and to introduce a new onus on employers to make it absolutely explicit to their staff that these agreements cannot be used in cases where a potential crime has been committed.”
Under the suggested new rules, employers will be held responsible for protecting employees from instances of harassment. There is also talk of a national database for the reporting of complaints.
What does this mean for employers?
The Equalities Select Committee is now conducting an inquiry in to the use of NDAs, as mentioned above, and while the sentiments in these reports are not yet part of law, they present important questions to employers. In their initial report, the committee found the following[5]:
“NDAs are used unethically by some employers and also some members of the legal profession to silence victims of sexual harassment, and there is insufficient oversight and regulation of their use. It is unacceptable that victims are scared to speak about their experiences of sexual harassment in the workplace and that those who use NDAs unethically are not held to account.”
Employers may quite legitimately ask employees to sign a non-disclosure agreement before they begin work for the purpose of protecting trade secrets and their competitiveness in their market.
Similarly, in settlement agreements. There are certainly times where signing an NDA is genuinely in the interest of an employee – perhaps because it is the path that will lead to the least negative impact on them, both in terms of not having to go to court and to maintain their privacy.
In both areas, it is the unethical application that has gained attention and the enforceability of NDAs could be threatened as a result.
Employers need to start at ground level in their approach to harassment in order to protect themselves. The committee’s report has useful headline points for employers on their responsibilities:
· Put sexual harassment at the top of the agenda
· Require regulators to take a more active role
· Make enforcement processes work better for employees
· Clean up the use of NDAs
· Collect robust data on the extent of sexual harassment in the workplace
Best practice would be to proactively attempt to prevent any workplace misconduct from occurring through clear policies within employment contracts, open reporting processes and firm disciplinary procedures. Should an allegation of harassment come to light, investigate it quickly and consider independent counsel to ensure impartiality. Should allegations be proven, ensure any resulting discipline is in accordance with the company policy, and any dismissal is in accordance with employment contracts. Maintain an open dialogue with the victim about the actions being taken.
We help our clients identify and mitigate areas of potential risk, and work with them to put in place appropriate policies and practices. Please contact us if you would like to discuss this further.
[1] https://www.sra.org.uk/solicitors/code-of-conduct/guidance/warning-notices/Use-of-non-disclosure-agreements-(NDAs)--Warning-notice.page
[2] https://www.parliament.uk/business/committees/committees-a-z/commons-select/women-and-equalities-committee/inquiries/parliament-2017/sexual-harassment-workplace-17-19/
[3] https://www.lawsociety.org.uk/communities/the-city/articles/the-use-of-non-disclosure-agreements-in-employment-contracts/
[4] https://www.telegraph.co.uk/news/0/non-disclosure-agreements-everything-need-know-ndas-misuse/
[5] https://publications.parliament.uk/pa/cm201719/cmselect/cmwomeq/725/72508.htm#_idTextAnchor066